Conflicting interests in a Circular economy.

Koos van Niekerk

I my earlier blog for the Minor-study Sustainability I said that “I am …a self-declared advocate of a liberal economy given its innovation power; at the same time, we should have a strong state to ensure social justice and to solve environmental issues”.  The focus of this earlier blog was on energy issues and climate change and I think that only a strong state can realize the radical change needed for ‘vergroening’ of our society. This is to be achieved by fiscal measures, such as a CO₂-tax, and, if necessary, a much stricter regulatory framework to steer production and consumption towards a much more sustainable one.

Waste reduction and waste management in the new high-rise dwellings in The Hague is my current assignment. To this end, we had very inspiring meeting with Ger Kwakkel, ‘Circular Economy’ Programme Manager of the Municipality The Hague. Ger advocates to completely abandon the ‘old method’ of waste disposal for free and of separation of waste as the single performance indicator set by authorities. Instead, we should think in terms of ‘Circular Economy’ where there are closed-loop material flows in an economy and ‘former’ waste is valued as a resource to create new products and services instead.

He gave a nice example of a start-up producing a belt (‘broekriem) made from old bike tubes and being sold at € 30. In such a system production factor prices should include ‘Common ground’ environmental-societal costs, which must be set by a pro-active Government. In such an approach it is up to the market to choose the most efficient production methods, maybe in some cases with government support for ‘green methods’ in an initial development phase. A few couple of days later the PBL-report ‘Circulaire economie in kaart‘ appeared reflecting Ger’s views to such an extent that I checked whether his name was on the authors list.

Well, so far so good: more support for my slogan ‘a liberal economy but with a strong government’. This all works well in a closed economy on a European scale, but what about imports? China, a major trading partner of the EU, is said to apply much lower environmental standards than the EU. To create a so-called ‘level-playing-field’, import levies can solve this issue, something not unusual for the EU which sometimes uses levies on Chinese steel, saying China is dumping steel. Levies might involve some tedious WTO-procedures and even some trade wars, but if we join forces with Uncle Donald of the United States we can manage. But now the ‘Action’ shop: it is selling a belt coming from Bangladesh for a price of € 1,99, whereby the import price is most likely less than € 1. Assuming the Dutch, great bike riders as they are, will be prepared to pay € 30 for the ‘fietsband’, if it means a € 10 premium compared with an ‘Action belt, the latter should be priced at € 19,99, meaning the EU should apply a €16 import levy on the Bangladesh belt. My ‘social justice’ inclination is now saying ‘No’ for a poor country like Bangladesh, no, we cannot do that. Now comes India, an emerging economy, something in-between?

What to do? ….It is not easy